Wells Fargo Expects Jack Henry's Core Operations To Accelerate, Upgrades To Outperform

Jack Henry & Associates, Inc. (NASDAQ: JKHY)'s underperformance versus peers presents an entry point into a high-quality company, according to Wells Fargo.

The Analyst

Wells Fargo’s Timothy Willi upgraded Jack Henry & Associates from Market Perform to Outperform and reduced the price target from $160 to $155.

The Thesis

While mobile banking is likely to remain strong, Jack Henry’s revenue growth may accelerate as new customers are added to the card-issuing platform, Willi said in a Thursday upgrade note. 

The company has indicated a steep uptick in core system evaluations, the analyst said. Jack Henry may also be able to achieve margin expansion as legacy card customers are converted to the new system and the old system is terminated, he said. 

Willi expects these developments to drive core revenue and EPS growth of around 7.5 percent and 12 percent, respectively, in 2020.

Wells Fargo lowered its EPS estimates for FY19 from $3.78 to $3.57 purely to reflect the reduction in termination fees, while citing this as a “qualitative positive.”

Price Action

Jack Henry shares were down 0.39 percent at $131.53 at the time of publication Thursday. 

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